Marketplace Podcast Summary – “Vote with Your Wallet”

Release Date: February 19, 2025

In this episode of Marketplace, host Kai Rysdal explores the intricate relationship between consumer behavior, political dynamics, and economic policies. Titled "Vote with Your Wallet," the episode delves into how individuals' purchasing decisions are increasingly influenced by their political beliefs and broader economic factors. Through interviews with experts and industry insiders, the episode offers a comprehensive analysis of the current economic landscape, highlighting key developments in regulatory policies, the housing market, consumer spending trends, the impact of tariffs, and advancements in technology.

Presidential Control Over Independent Agencies

The episode opens with a critical examination of President Donald Trump's executive order titled "Ensuring Accountability for All Agencies." This order asserts direct presidential control over traditionally independent federal agencies such as the Federal Trade Commission (FTC), the Securities and Exchange Commission (SEC), and parts of the Federal Reserve.

Sarah Binder, a professor of political science at George Washington University, discusses the constitutional implications and potential overreach of this executive order:

“I think it grabs power from Congress who set up the rules of these agencies in the first place. I think in my view is patently unconstitutional.”
[05:08]

Binder emphasizes the historical context of independent agencies, noting:

“The very first of these independent agencies were really the end of the 19th century... progressives are looking for ways to insulate these sort of implementers of law from politics and especially from presidential whimsical.”
[02:00]

She expresses concerns about the erosion of institutional independence, which was established to prevent political whims from influencing economic decision-making:

“Whenever you have some stronger tinge of presidential control, people are going to wonder like, is that a legitimate exercise of power?"
[04:22]

Binder highlights the uncertainty surrounding the executive order's impact on financial stability and the Federal Reserve's autonomy:

“There's a lot of question marks from that executive order about how much autonomy the Fed really can keep with letting the President and OMB anywhere into its decision making.”
[03:16]

Housing Market Challenges

The discussion shifts to the housing market, where several factors are contributing to uncertainty and reduced construction activity. Housing starts fell by 9.8% between December and January, and the National Association of Home Builders (NAHB) confidence index reached its lowest point in five months. Rising mortgage rates, now near 7%, and impending tariffs on building materials are further dampening homebuilders' outlook.

Odette Kushi, deputy chief economist at First American, connects policy decisions to market sentiments:

“President Donald Trump proposed and then paused 25% tariffs on imports from Canada and Mexico. So that really weighed on homebuilder sentiment.”
[07:49]

Builders like Bart Frisbie, president of Sterling Homes, remain hopeful despite challenges, aiming to expand projects in states with loosened permitting laws:

“We've got a couple projects in the pipeline, including a brand new 32 home neighborhood.”
[08:24]

Susan Wachter, professor at the University of Pennsylvania, underscores the cost pressures faced by builders:

“Builders are meeting price resistance in the market, and there's not much builders can do because their costs are going up.”
[09:00]

The significant shortage of approximately 1.5 million housing units exacerbates affordability issues:

“The lack of that is pushing people out of the housing market, and that's the issue right now.”
[09:23]

With elevated mortgage rates and increased material costs, the affordability crisis in housing remains a pressing concern:

“If rates stay elevated and tariffs make building materials more expensive, that issue won't go away.”
[09:23]

Etsy and Consumer Spending Trends

The episode highlights the struggles of Etsy, whose shares plummeted over 9% following a disappointing fourth-quarter performance. Despite growth in consumer spending at the end of the previous year, Etsy anticipates continued challenges due to increased competition from mass-market platforms like Temu and Amazon.

Brett House, economics professor at Columbia Business School, explains the persistent demand for affordability:

“The trend of consumers seeking cheaper prices isn't going anywhere.”
[10:57]

Sky Canavas, a retail analyst at eMarketer, notes Etsy’s strategic focus on artisanal products may limit its broader appeal:

“That focus is likely to appeal to a smaller audience, and so we would expect to see their sales continue to contract in line with that trend.”
[10:57]

The episode also discusses the significant shift in consumer behavior post-election, with many consumers adjusting their spending to align with political beliefs:

“More Democrats say they've changed their spending habits recently than Republicans, according to the Harris Poll.”
[12:21]

This politicization of consumer behavior poses additional challenges for Etsy, as polarized consumers may opt out of supporting certain brands based on their political affiliations.

Consumer Behavior and Political Alignment

A Harris Poll reveals that over 40% of consumers have modified their purchasing habits to reflect their political beliefs since the latest election. Specifically, 25% have stopped buying from their favorite brands, and about 33% express no interest in supporting the economy, seeking ways to opt out altogether.

Timothy Werner from UT Austin relates this trend to President Trump's "Grab Your Wallet" campaign aimed at discouraging spending at companies associated with his administration:

“When people are angry with a company over its politics, it's typical for them to stop shopping there, at least for a while.”
[12:35]

Bruce Fried from the Center for Political Accountability highlights the rise of economic boycotts as a manifestation of heightened political polarization:

“Economic boycotts are increasingly common as our politics have become much more polarized and much sharper.”
[13:04]

This shift has significant implications for businesses, especially those heavily invested in lobbying and political contributions, as these entities may benefit more from government contracts and favorable regulations than from direct consumer support.

Impact of Tariffs on Businesses

The conversation returns to the impact of tariffs, detailing how President Trump's proposed 25% tariffs on steel and aluminum are affecting businesses differently. Justin Ho reports on Maverick’s manufacturing partners in Escondido, California, illustrating the real-world consequences of these tariffs:

“The tariffs don't even have to be in effect. It's just the threat of them. And that's creating a tremendous amount of uncertainty.”
[17:29]

Satyam Pandey, chief US and Canada economist at S&P Global Ratings, advises businesses on strategizing around these cost increases:

“If your customers are small businesses, for example, you would probably want to think twice before doing that in your renegotiations of the contract.”
[18:30]

Conversely, J.C. Hill of Alvarado Street Brewery opts to absorb costs to maintain price stability for consumers, highlighting the varied responses businesses have to tariff-induced challenges:

“I don't want to pass along any cost increases to my customers, especially after all of the inflation in recent years.”
[18:44]

This disparity underscores the differing capacities of businesses to manage increased costs, with larger companies like those in the defense and energy sectors better positioned to pass on costs compared to smaller enterprises.

Voice Assistants and AI Development

The episode also examines the current state and future prospects of voice assistant technologies like Siri and Alexa. Despite advancements, these traditional voice assistants lag behind AI-driven chatbots such as ChatGPT and Google’s Gemini in conversational capabilities.

Susan Wachter and Brett House discuss the limitations of existing voice assistants, which struggle with complex, context-driven interactions:

“Even the most advanced AI systems can only engage in so much back and forth. They find an answer or confidently make one up instead of asking follow-up questions.”
[21:42]

Larry Heck, engineering professor at Georgia Tech, emphasizes the need for more sophisticated AI models to enhance conversational depth:

“They still can’t handle the natural flow of human conversation, making interactions with voice assistants less intuitive.”
[22:30]

The potential for AI-enhanced voice assistants lies in their ability to emulate human-like conversations, making interactions more natural and reliable. However, significant advancements are required to achieve this level of sophistication:

“Most people don't need stand-up from their voice assistants, but Barry says using more sophisticated AI language models... will make it easier to communicate with devices the way we do with people.”
[22:58]

Market Numbers and Closing

In the final segment, Kai Rysdal provides a rundown of the latest market numbers, highlighting key movements in major indices and individual companies:

• Dow Industrials up 71 points
• NASDAQ increased by 14 points
• S&P 500 rose by 14 points
• Intel experienced a roller coaster, dropping 10%
• Tesla grew by 1.8%
• Hims and Hers Health saw a significant share increase of 17.5% following its acquisition of Tribe Labs

Rysdal concludes with a simplified translation of a Federal Open Market Committee (FOMC) statement, making economic jargon accessible to everyday listeners:

“The current high degree of uncertainty made it appropriate for the committee to take a careful approach in considering additional adjustments to the stance of monetary policy.”
[25:05]

"Vote with Your Wallet" offers a thorough exploration of how political actions and economic policies are shaping consumer behavior and business strategies. By examining the interplay between independent regulatory agencies, the housing market, consumer spending, tariffs, and technological advancements, the episode provides valuable insights into the factors driving today’s economic environment.